JAPAN'S Canon Inc said yesterday its profit gained 1.8 percent in the October-December quarter from the year before, with sales of office equipment and cameras largely offsetting a rise in research and development expenses.

Net income rose to 127.8 billion yen (US$1.197 billion) in the company's fiscal fourth quarter from 125.6 billion yen a year earlier, the Japanese electronics maker said in a release.

Sales climbed 3.9 percent to 1.264 trillion yen from 1.217 trillion yen posted the year before, it said.

Office equipment sales rose five percent on growth in its combination printer-copier-fax machine business. Single-purpose monochrome and color laser printers also helped support growth.

Sales of digital compact and single lens reflex cameras fueled a 5.4-percent growth in the company's digital camera business from the year before, it said.

But greater R&D spending and a rise in operating expenses held fourth quarter profits down, the company said.

For the full year, income rose 7.3 percent to 488.33 billion yen from 455.3 billion yen in 2006. Sales rose to 4.48 trillion yen from 4.16 trillion yen.

The data marked the eight straight year of profitability, although it missed the company's forecast for 500 billion yen in profit on 4.56 trillion yen in sales.

Sales of digital cameras remained strong over 2007, helping the Tokyo-based manufacturer soak up the impact of the strengthening yen on its exports.

For the coming year, Tokyo-based Canon expects continued economic growth in Asia despite anxieties about a possible slowdown in the global economy and rising energy costs. It is forecasting 2008 income to climb 6.5 percent to 520 billion yen on sales of 4.72 trillion yen.

Canon shares fell 1.88 percent to close at 4,690 yen in Tokyo yesterday.